What’s up with SpongeTech?
Today's Financial News - Posted November 11, 2009
SpongeTech (PINK:SPNG) is a dangerous investment, yet it has a spectacular upside. If it turns out the company is not run by a bunch of crooks, today’s investors could be sitting on monstrous rewards.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): I don’t know why, but I still have some faith in my fellow man. We may lie and deceive each other, we may stick a knife in a shopkeeper’s thigh to get at his register and we may blow each other up in the name of religion, but as a whole we are not that bad.
In fact, just the other day somebody held a door for me… at the airport, nonetheless.
Maybe I am naïve or just plain ignorant to the lengths some folks will go in the name of greed, but I have no problem giving somebody the benefit of the doubt, especially when everything they say is monitored by men that can put them behind bars.
That is why I have a hard time believing SpongeTech (PINK:SPNG) is a full-on sham.
If you have been following the company’s story, you know the news is not promising. After releasing report after report of promising sales and increased revenues, investors thought they may be onto something.
But than a couple of auditors quit, the New York Post ran stories of scandal and the SEC stepped in.
The Wall Street cops halted trading and began an investigation. The action spooked any bullish investors.
Bad boys, bad boys
That was in early October. Now, more than a month later, the investors that still want in on the action (there is a horde of them) are stuck buying shares off the Pink Sheet market. They are getting the ultra-speculative shares at a fraction of what they were going for just eight weeks ago.
The question is, are they making a smart move?
While just about every back-of-the-phone-book lawyer is working on getting the lead of a class-action lawsuit, the company is going about its day-to-day business.
Since late October, SpongeTech has announced another handful of sponsorship deals, including contracts with the Cleveland Cavaliers, the Charlotte Bobcats and Major League Baseball.
Even more interesting, the company has quietly re-negotiated a once-null deal with GetFugu, a mobile search provider. The companies are once again moving forward with a $1.75 million deal that allows SpongeTech to be a premier user of the company’s up-and-coming technology.
While this deal has little material worth, it is a signal that things have got to be improving at the home office. At the very least, it is proof that somebody at SpongeTech is still answering phones and writing press releases.
Yet there is still no official word from the SEC or an annual filing.
While I am nowhere close to believing SpongeTech is a surefire investment that deserves your retirement dollars, I am convinced of its merit as a speculative investment. It is a high-risk play, but with a current share price of less than a nickel, the opportunity to bag big gains is there.
Right now, investing in SpongeTech is not so much as an investment in an innovative product that can clean your car or shine your baby’s head. It is an investment in mankind.
That means there is a very good chance you could get burned. But my money is on the upside.
Next Article: TFN eNews 11/11/2009: We’re happy to profit from this asset bubble… as long as it lasts!
15 Responses to “What’s up with SpongeTech?”
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November 11th, 2009 at 10:26 am
I’ve invested in this company for the long term. Some parts are scary, In the long term the potential seem to be worth the risk. The companys stated goal is to be on the Nasdaq , that requires $4.00 a share. The main difficulty is SEC filings ( which are months late). The positive side is there is no creditable evidence against the company. What is unbelieveable about the company is the amount of growth in the past year (800% +) from almost nothing to multimillions, aquistions, worldwide distribution. Just to good to be true? or To good to ignore? The technology allows a simple sponge to hold a quart of soap. Which slowly releases as you use it. Over 70 different products are currently sold @ retail and many more are under develoment. You can see unbiased reports on youtube. Product is available at retail stores and online. Customers love the product, buy one for yourself and then judge facts for yourself. Sponge bob for childrens bath or car wash kit for cars.
November 11th, 2009 at 11:04 am
I think you are right on with your analysis. I’ve been acquiring shares for 6 months. I used the product several times and it works very well. I do see it in many stores, so they obviously are selling the stuff. Being a CPA however, I am sure that something is up with the financials for the 10Q to be held up so long. I have reviewed the last financials they did issue 2-28-09 and they looked ok at face value. It seems that some of the early customers they were selling to might be in question but their current customer list is quite impressive. I’ll continue to hold for now with the speculative portion of my portfolio…..I think it is a better than 50/50 chance this thing hits 50 cents by January.
November 12th, 2009 at 11:00 am
I believe the Spongetech is going to emerge from the SEC investigation and be stronger for having gone throught the scrutiny. They have exhibited tremendous growth which took even the management by surprose and this has developed into a company which will continue to gain the attention of the public as more of their products come to market.
This is a clear take over candidate for sure and it will sell for a huge premium when the time comes. They hold patents on their products and recently purchased the R&D company that developed the products for them. This is not a scam nor is it a one trick pony.
November 12th, 2009 at 11:23 pm
This I wrote to Spongetech 12.November:
Dear,
I’m very disappointed with the ways your company acts towards the potential business partners. It’s mostly the fact, that when you receive a business related question from your investor you don’t even bother with an answer. This fact only confirms why so many institutions and investors are fighting with you, which is only hurting your company. As a stock holder I’m not going to just watch, and I will spread the word about your unprofessional behavior across the european market at least. I resisted all the bad things that were said about your company, until I experienced your unprofessionalism myself, which only confirmed all the rumors about your company.
Just for your information, I became an owner of a few european domains – pongetech.com.ua, spongete.cz., spongetech.pl, and several others. I don’t offer you these for sale, rather I’m planning on informing others about the ways you treat your investors and business partners on these sites. One more weapon for your enemy, which only you are responsible for.
Best regards
Martin Razek
This is the answer from Stewen Moskowitz : I’m sorry you feel that way.
My opinion: if you manage the companie like this we do not have future.
November 13th, 2009 at 6:46 pm
I think it is amazing that someone can write an article about spongetech and fail to mention the 800 pound gorilla in the room on this stock. You could not have done any extensive research if you do not recognize that there is a massive Naked Short position in this stock. Even if you do not agree with the idea that a Naked Short Position exists in this stock you are not doing the readers justise to completely ignore this fact in your article.
This is a company with 50 million in revenue for the 2009 fiscal year and unless the SEC shuts the company down and makes a public statement that the revenue numbers are wrong you have to at least mention that in your article as well. How many stocks are there in the world with 50 million in revenue with a 10 million dollar profit with no debt that have a share price of .05 a share? None that I am aware of.
Please feel free to contact me if you would like to learn more facts about this company before you write another half hearted one sided article.
November 13th, 2009 at 10:47 pm
I must say this is probably the first “objective” article I have read since the all out attack of the NSS dark side began. Although it makes me cringe when a journalist gets their facts wrong and has various spelling mistakes… maybe I’m being to picky, but if you’re going to be taken seriously, then your article should be more “clean” than this.
SpongeTech DID NOT have two auditors quit. Drakeford and Drakeford had their license suspended (nothing to do with SpongeTech), and DeLoitte & Touche never began. And after reading their PCAOB from 4/16/09, the violations of their auding practices make me wonder why their license hasn’t been suspended? When you term your comments this way, it’s misleading. You give the impression that they quit because they didn’t want to do business with SpongeTech.
It would have been nice if you could of pointed out that the very company (GetFugu) who made very public defamatory comments regarding their reason for pulling out of the deal with SpongeTech, has re-negotiated and come to an agreement. Guess they were hoping to not have to pay back the 1.7 million dollars if they could jump on the “search & destroy” mission that the NSS dark side initiated right after the reverse split was announced. I guess SpongeTec pissed off these illegal shorters that were in jeopardy of cashing in millions for zero dollars invested.
Meanwhile, the SEC has done it’s part to assist all those illegal activities by not following the audit trail and investigating MM’s like NITE and SALI. No… instead they simply help drive the pps down, giving all those million phantom shares out there a chance to cover.
I am a shareholder, I am a product tester, and I believe SpongeTech will come out of this very, very well. The way they grew their company was smart… not depending on the standard financial centers for backing them. Good lord… after what Goldman Sachs did to Bear Stearns and Lehman Brothers, I can hardly blame them. They have a product that’s selling, and their financing is accomplished from within… two winning combinations that the dark side can’t control. And that my friend is why this company will come out of all this just fine.
November 15th, 2009 at 5:14 am
Mr. Razek: IMO, you no comprihen the VERY GOOD POLICY we have in place for UNSOLLICITED suggestions., and to protect our company against big ego and dangerous individuals like you. Here is the reminder:
“SpongeTech’s Unsolicited Ideas Policy
SpongeTech or any of its employees do not accept or consider unsolicited ideas, including suggestions and ideas for new advertising campaigns, new promotions, new or improved products or technologies, product enhancements, processes, materials, marketing plans, new product names and the like. Please do not submit any unsolicited ideas, original creative artwork, suggestions or other works (“submissions”) in any form to SpongeTech or any of its employees.
Why does SpongeTech have this policy?
The sole purpose of this policy is to avoid potential misunderstandings or disputes when SpongeTech’s products or marketing strategies might seem similar to ideas submitted to SpongeTech. If, despite our request that you not send us your ideas, you still submit them, then regardless of what your letter says, the following terms shall apply to your submissions…”
Key words for you Mr. Razek: “Please do not submit any unsolicited ideas” (*** DO NOT ***)
DO NOT.
Do not steel from our U.S.A. SpongeBob witch is patented and owned holy by SpongeTech, Inc because of Dicon. Do not steel jobs from our American soil.
Mr. Razek: You are a dangerous individual for my company. (I hope you won’t tell me that you own no share because that would TOTALLY UNVEIL your hidden agenda)
November 15th, 2009 at 8:46 am
At least he is answering…..
November 15th, 2009 at 12:52 pm
Hey Mr.Razek,
i guess you’ve tried to get some buisiness/money out of Spongetech(TM) by offering your Services for promotional textile products to them, correct?
By looking at the WHOIS Data for your registered Domains it was easy to figure.
contact: ZONER-20091023142
org: Martin Rázek
name: Martin Rázek
address: Hostovická 194
address: Pardubice
address: 53301
address: CZ
phone: +420.466645502
e-mail: martin [dot] razek [at] gekko [dot] cz
registrar: REG-ZONER
created: 23.10.2009 14:02:42
Then goto: http://gekko-promotion.czechtrade.us/
I bet the CO declined to do any business with you, though you bought some european Domains and now you are trying to sell them for a premium to the CO *LMAO* btw there are more available:
spongetech.co.nl spongetech.nl spongetech.se spongetech.ro spongetech.at spongetech.lu spongetech.ru spongetech.tel spongetech.me spongetech.li spongetech.be spongetech.jobs spongetech.co.ee spongetech.es spongetech.lt spongetech.ie spongetech.gr spongetech.im spongetech.lv spongetech.fr
Good Luck man !!
November 16th, 2009 at 5:57 am
Razek failed to mention in his post above that he asked SM to go directly against Spongetech company stated POLICY!
See the Spongetech website to read this publicly posted policy directing ALL SPNG employess to not accept any suggestions, inputs etc for products advertising or anything else.
Yet despite this, Razek sends a suggestion to them and when they don’t respond he gets all upset and posts defamatory crap like this. I hope they sue Razek.
November 16th, 2009 at 9:24 am
Martin…
If you took a half a second to research “your investment” you would know about an SEC investigation and lawsuits that are pending for and against SPNG.
So it is very obvious that they are “gagged” from speaking freely right now, either from their own attorney or directly by the SEC.
And this is a good thing!
Why do you think their transfer agent was “gagged”, why would the SEC sign off on that??
Naked Short Sellers are trying to make as much as they can with this company. SPNG is trying everything they can to “stick it to the NSS”.
The less information available is harder for everyone, including the NSS. Until they have their ducks in a row, then they will hit us with the 2008 10K, 2009 10K, 2010 10Q, Sales numbers for Sept., Oct., Nov., new products (hockey puck sponge for one, Dora, Go Diego, Pink Panther, etc.) more retailers nationwide, more marketing, etc.
SPNG is growing very fast and there are probably a few minor infractions in SPNG’s history or paperwork for accounting, all companies have less than perfect pasts. But based on all the information available it seems that SPNG will become stronger after all this scrutiny and press, good and bad.
And Martin… on a personal note, you have to be pretty dumb to threaten a company with slander, and give them the domains that your going to use to do so. You have made it so easy for them to track you and sue you like Spongeables/Spongelle.
November 16th, 2009 at 10:17 am
I search for companies like Spongetech to invest in, and I stand by this pick as a company that will continue to grow. High revenue growth, low debt, aggressive and savvy marketing, partnership with known entities (Spongebob/Dora etc) and use of high profile marketing (sports venues), newer company, patented products, good production facilities to keep up with growth, and distribution. Take out a dud accounting firm and some use of this stumble by the huge short selling interest on wall street and you have a stock trading over $1. So I am taking advantage of all the negatives to load up on some of the most undervalued shares on the market. Only time will tell, but I think Mr. Snyder was right on the money – the high profile marketing and large venue distribution locations (Costco, Sears, Kmart etc) are just too “real” for a scam, and the fact they keep rolling out the marketing partnerships are indicative that the SEC investigation is more interested in the NSS than the claims from such reputable sources as NY Post (haha) about old accounting practices.
Mr. Steve – I hope you’re right about 50cents + by new year!
Mr. Razek-You sound like an angry little man. Pity.
November 17th, 2009 at 11:42 pm
Ok to be fair if the stock as Mr. Santino wrote the price by new year will be 0,50 no R/S, USD I will transfer all the domain to Spongetech for free. Mr. Steve know how contact me. What will do you – big men Santino. Are you able to accept fact than Im only angry how the companie behave to the investors. At least Im to big to write under my real name.
December 21st, 2009 at 2:44 am
everybody stay calm… see this as a lottery ticket.
either it expires or you make a bundle.
dont invest more than you can lose from this perspective
January 9th, 2010 at 4:11 am
$ 50 million in sales is equivalent to 10 million (+)units sold per year(gross estimate). Highly, highly improbable…check out the sports illustrator story that cites the sales penetration of a like kind product. The product isn’t earth shattering spectacular, and it is 10 times more expensive than a regular sponge. Venture capitalists use 1/10 of a percent to ballpark initial sales penetration. In the US market that would equate to 250,000 people. After 5 years of a well managed and executed sales program, it may be possible to see such a product get in the hands of 1 million of the population. But we’re kidding ourselves if we think they can sell to 10 million.
As an investor, when I think sales, I think cash, plus accounts receivable. And the AR has to be quality…meaning they are committed orders that will convert to cash within 30 days.
Mass delivery of product and the buying of shelf space doesn’t constitute a bona fide sale in my book. Delivery isn’t a sale.
The reason this company doesn’t have debt is because it couldn’t get debt, instead they have over-diluted the company with equity, and used that equity to hype image and deliveries to generate even more equity.
If they truly had the cash flow from the spectacular sales they are claiming they would acquire debt to buy back shares so that they could have a lower cost of capital. After all, equity is substantially more expensive than debt. They would also be using debt to finance short term inventory turnover and other current needs. Equity for such purposes is last resort financing.
The fact that they can’t get debt to finance inventory and production is a telling indicator that debt underwriters are seeing right through their delivery ploy. Once Underwriters caught a glimpse of the blatantly poor AR ratios and the squalor cash conversion cycle, they probably quickly turned off their calculators, closed their briefcases, and walked out the door without saying another word.
Until the company reveals its sales details and allows investors a chance to evaluate the quality of the sales, the likely conclusion of the reported 50 million is that it is a sham.
Sales is vanity. Profit is sanity.